Defense of Marriage Act
IRS Issues Guidance Recognizing Same-Sex Marriage for Federal Tax Purposes
In the wake of the U.S. Supreme Court’s decision in U.S. v. Windsor, which struck down the Defense of Marriage Act, the Internal Revenue Service (IRS) has issued guidance providing that same-sex marriages will now be recognized for federal tax purposes, regardless of the couple’s state of residence, as long as the marriage was performed in a jurisdiction that recognizes same sex marriages, including a foreign country. Married same-sex couples may therefore file their 2013 federal tax return under a married status. The ruling has retroactive effect, meaning that couples who were married prior to the Windsor decision may amend their prior years’ returns to obtain refunds based on their married status going back to the IRS’s limitations period for refunds (generally three tax years).
In addition, the guidance provides that employers are no longer required to treat benefits provided to same-sex spouses, including group health coverage, as after-tax. Employers may also obtain refunds of any payroll taxes (including FICA taxes) paid on benefits to same-sex spouses previously treated as after-tax for the limitations period (also three years).
It should be noted that the recognition does not extend to civil unions, domestic partnerships, or any other type of unions recognized by states. The IRS will begin enforcing these rules on September 16, 2013. In the coming months, the IRS is expected to issue additional guidance on the application of the Windsor decision to the many specific employee benefit plan spousal rights issues that employers now face. We will update you on this guidance when it is released.
Health & Welfare Plans
Health Care Reform: IRS Issues Final Regulations on Individual Mandate
The IRS has published final regulations regarding the individual mandate component of the Affordable Care Act (ACA). The regulations are largely unchanged from the proposed rules published on February 1, 2013, and provide that individuals must maintain “minimum essential coverage,” or pay a penalty, also known as a “shared responsibility payment.” Under the regulations, an individual is considered to have minimum essential coverage during a particular calendar month if the individual is entitled to receive benefits for at least one day during the month. The regulations also provide exemptions from the penalty on various grounds, including religious conscience, economic hardship, and incarceration.
“Minimum essential coverage” includes coverage under employer-sponsored group health plans, government-sponsored plans, grandfathered health plans, individual plans, and any other coverage defined as constituting minimum essential coverage. The IRS will begin enforcing the rule effective January 1, 2014. Even though the individual mandate is still scheduled to be effective beginning on January 1, 2014, the employer “pay or play” mandate has been delayed until 2015, as noted in our prior FR Alert.
Health Care Reform: Reminder of October 1 Deadline to Provide Notices of Exchange Coverage Options
As a reminder, most employers are required to provide a notice of exchange coverage options to current employees by October 1, 2013. We summarized this requirement in a prior FR Alert. Importantly, the Department of Labor (DOL) has provided model notices that employers can use to satisfy this requirement (one model notice for employers that offer health coverage, and another model notice for employers that do not offer health coverage).
Employers are also required to provide information regarding exchange coverage options in COBRA election forms, beginning October 1, 2013. Again, the DOL has provided a model COBRA election notice that can be used for this purpose.